DogVacay's Revenue Picture Looks ... Ruff

Updated 1:11 am, Tuesday, February 12, 2013

The site got a lot of Silicon Valley buzz and raised $7 million from top-notch investors.

Whether it can generate enough revenue to survive, however, is an open question.

Cofounder Aaron Hirschhorn told Business Insider that the marketplace for long-term dogsitting arrangements is close to having paid out $2 million to approximately 9,000 hosts. That's up from $1 million paid out in mid-November.

To date, DogVacay has booked more than 75,000 dog-nights.

That sounds fantastic: Clearly, there's a decent number of consumers interested in the service.

However, DogVacay collects a 15% cut of boarding fees when a dog owner agrees to board his pet with a host. So its revenues from hosting fees, based on the $2 million figure, are around $300,000. (Or less: DogVacay originally charged a 10% cut, later raising it.)

DogVacay's average rates are $28 a night, which is about half what a kennel would cost.

We asked Hirschhorn, who started the company with his wife, Karine, in 2011, why it would disclose a proxy for its revenues at such an early stage.

"For a private company like us, I feel like we're being extremely transparent," said Hirschhorn.

Those payouts don't include marketing expenses like the $10 incentive payment DogVacay offers to hosts who sign up new customers—who also get $10 coupons. DogVacay has offered numerous daily-deal discounts through Groupon and others, but besides those, Hirschhorn says that most of the company's marketing has been word of mouth.

Can DogVacay make money in other ways besides hosting fees? The company also sells discounted premium insurance policies to dogsitters for $48 a year, but Hirschhorn said that's not a significant revenue source. Selling add-on services like grooming and dogwalking contributes a "material" amount of revenue, he said.

The company is also testing GPS dog collars with 15 to 20 hosts in the Los Angeles area, so owners can see what their dogs are up to. It doesn't charge for those at present, but it plans to.

The Hirschhorns personally made $30,000 over eight months through DogVacay-style dog boarding before launching the company—enough to fund their wedding and a honeymoon on three southern Caribbean islands, and to allow them to quit their jobs and start the company. So clearly it can work on some limited basis.

But DogVacay has yet to prove that it can scale its model up to the mass level, and generate enough sales to keep investors happy. The company has 23 employees, Aaron Hirschhorn told Open Forum earlier this month.

Hirschhorn says that his company is the largest player in the peer-to-peer pet services space.

That raises questions about how many big opportunities there really are in the field of "collaborative consumption," where consumers sell underused resources like empty seats in their cars, empty beds in their guest rooms, and empty dog beds next to those guest beds.

Which is a bummer, because we would love to know that we have backup options if Ramona the Love Terrier ever needs a vacation.